November 10, 2017
Rahul Shrivastava|Posted by Sonalee Borgohain
The GST Council meets today in Guwahati for a crucial round of discussion on removing several items like building material from the high tax slab of 28 per cent.
The battle for Gujarat has shattered the veneer of consensus in the apex decision-making body for one tax for all India GST council. The council meets today in Guwahati, Assam for a crucial round of discussion on removing several items like building material from the high tax slab of 28 per cent.
After the first time since GST was rolled out on July 1, the Guwahati meet may be considered the most comprehensive overhaul of rates and compliance system.
The GST Council today in its 23rd meet may consider reducing items in the 28 per cent tax slab. Tax incidence on daily use items, building material like tiles, hand made furniture, and plastic products are likely to be reduced.
A group of finance ministers headed by Assam Finance Minister Himanta Biswa Sarma had suggested two important changes and the first was lowering tax rates for eating out. The committee proposed removing the tax rate distinction between AC and non-AC restaurants. It had suggested restaurants with a turnover more than Rs 1 crore need to be taxed at 12 per cent compared to the existing 18 per cent.
The committee, after discussion, suggested the two slab systems for hotels charging more than Rs 7,500 per night should be done away with. Currently hotels charging Rs 7,500 charge 18 per cent while 5 star hotels attract 28 per cent. If the recommendation is accepted, 5 star hotel rates may come down.
DAILY USE ITEMS
Real estate is not part of GST but construction/building materials are. Now the GST council may take up reduction in tax on tiles, pipes, and several other items from 28 per cent to 18 per cent.
Tax on shampoo, plastic pimples switches, taps etc may come down as well.
Currently, there are 200 items in the 28 per cent GST slab. The list is likely to be much thinner after the meet. The items which were cheaper before GST came into play are also likely to get a good hard look for possibility of reduction.
REDUCING RETURN FILING PAINS
The hardship faced by traders and businesses in getting acquainted with the compliance system is creating more critics daily. “The GST network is failing to handle the volume of business. Since activities don’t get matched payments are getting stuck. It is hurting small and medium enterprise,” said Badal. The Council may review the GST returns filing system to make it taxpayer friendly. The group of ministers headed by Sarma has proposed permitting all businesses to file returns after three months. Currently, only those who record a turnover less than Rs 1.5 crore are allowed this relaxation.
TARUN GOGOI STAGES DHARNA
The Congress, which has been taking on the Bharatiya Janata Party (BJP) in Gujarat by calling PM Narendra Modi’s top economic reform moves demonetisation and Goods and Services Tax (GST) ‘twin torpedoes’, on Thursday went ahead the war path. Former chief minister of Assam Tarun Gogoi staged a dharna outside the hotel in Guwahati where the council is scheduled to meet.
“The BJP used its superior numbers in the GST council and bulldozed decisions. Now it is facing trouble from traders, textile industry and others in Gujarat ahead of the polls. Hence, it is in a rush to make amendments,” said Puducherry Chief Minister V Narayanasamy, who holds the finance portfolio. The finance minister of Punjab too struck a discordant note. “The Congress wanted rates to be frozen at lower levels. But these suggestions were smothered with arrogance. A senior official even told me that the GST constitutional amendment is done and not one word can be changed,” said Manpreet Singh Badal.
Interestingly, the Congress finance ministers said that the government facing the heat in Gujarat has gone on a relaxation in compliance spree and the party welcomes it. “The changes were brought about in compliance with rules and tax incidence on some products was reduced only when the Congress insisted,” said Narayanasamy.
The assertion from the Congress ahead of the Guwahati meet, which is likely to further rationalise and reduce tax rates, is more to corner credit.
“The Congress is trying to muscle its way forward to claim that if tax rates are coming down it is because of them. It is a pure political gimmick to turn around and say decisions were taken by a majority move and not consensus. The Congress was a party to several items inviting higher tax rates,” said a BJP finance minister.
The Congress fired yet another salvo. The finance minister claimed that when GST was launched on July 1 only 7-8 of the 31 states and union territories with legislators were expected to earn lesser revenue than the pre-GST regime.
“But after the first two months, barring five all states failed to reach the target levels of revenue collection. This is due to the slowdown in the economy and the hasty manner in which the GST was implemented,” said Karnataka agriculture minister Krishna Byre Gowda.
He added, “Karnataka was the second highest tax generator in the country. The target for the first two months – July and August was in the excess of Rs 7,000 crore. The actual harvest was less than Rs 5500 crore.”
The Congress finance minister, with an eye on Gujarat polls, will demand lowering of GST rate from 28 per cent to a minimum of 18 per cent. It’s backing petroleum and real estate to be subsumed in GST. A proposal which will face opposition from other states and create more fissures. Kerala finance minister Thomas Isaac told India Today, “Real estate by constitutional provisions is a state subject. It can’t be subsumed in GST. We are against it.”
LOWERED GST RATES NOT BENEFITTING PUBLIC
The government’s readiness to amend compliance rules and tax slabs comes from the BJP’s assessment of unrest over GST in Gujarat. The government has found that GST is generating opposition due to three reasons- difficulties in compliance and working capital flow, high tax rate on items and the public not benefitting from reduced taxes on items.
Interestingly, Kerala has already conducted an elaborate survey of how public has not benefited from the reduced taxes on a large number of daily use and essential items. Kerala government surveyed and compared the market price of 650 brands score after GST. It found that 150 odd brands were padding the benefit of reduced tax or input tax credit to the public. When GST was launched to keep an eye on companies which don’t pass on benefits of reduced taxes or input tax credit to the consumers, a National Anti-Profiteering Authority was proposed by the government. The authority was to be empowered to cancel the registration of any entity which fails to pass on to consumers the benefit of lower taxes under GST.
“The Centre is yet to set up an anti-profiteering committee. We have asked the government to act against the 150 brands which violated the clauses. But at a time when the economy is sluggish and private sector isn’t enthusiastic about investing, the government is not in a mood to act. It hasn’t set up the anti-profiteering panel,” said Kerala finance minister Issac.